ULCC Model in the U.S.
 

What is the viability of the ultra-low cost carrier model in the U.S.? As companies like Spirit and Frontier continue to expand their fleet of A320neo aircraft, the profitability of these airlines in the current U.S. economy is undeniable. However, what are the pros and cons of their business model going forward? Are they a threat to the market share and dominance of the legacy carriers?

I'm genuinely interested because the model seems to be successful throughout Europe, however, I wonder if the ULCC model is filling a gap in the market or if it's eroding the profits of carriers like Delta, United, and American.

Moreover, pilots seeking jobs at major carriers have a lot of options nowadays and will hopefully continue to see a hot job market for a few years ahead. The ULCCs seem like great options and alternatives to the 'Big 6,' but I have to question whether these airlines have the career stability (as much as that exists in the airlines) that the Big 6 have...

1. ULCCs are struggling badly in Europe, with the exception of maybe three or so.

2. Long haul ULCCs are struggling even worse. They won't survive the next downturn in general.

3. The US has a domestic market for ULCCs, but they're not taking over. Most travelers don't want to put up with that crap, the just spend an extra $ 30-80. Also lucrative business and frequent flyers want miles they can bank. For vacation. In Europe, not Cleveland.

It's a legit business niche in the US, and if the pay and domiciles work for you there's no reason not to hang your hat at one here.

Macy’s and Walmart
McDonalds and Ruth’s Chris
Spirit and insert airline

Everyone can coexist.

“Most customers don’t want to put up with that crap”

Seriously? Have you seen the product by some of the legacy folk? Unless you’re up front on AA, I would rank that ride on par with Spirit or Frontier.

Correction....up front on an old Airways plane out of CLT is pretty bad too. And I hear Parker is cutting the legroom in first class as well.

Regression to the mean is already underway as legacy carriers try to adapt ULCC concepts for themselves, including shrinking seat pitch, credit card sales, checked bag fees etc. How much longer do you expect a carry on to be free at AA or UAL?

The problem with this comparison is that AA, for example, isn’t Ruth’s Chris.

McDonald’s and Steak and Shake is probably a better comparison.

Walmart and Target.

This notion that coach at a Legacy is such a better experience is as outdated as some of the very aircraft these Legacy airlines fly.

Forever... if you buy a normal ticket.

AA is kind of the worst case. ULCCs are a tapping a new customer base, they are not converting normal pax (upper middle class on average) into ULCC cannon fodder.

The legacies are competing by offering ULCC -equivalent packages in the rear cabin. They're trying to tap some of the market the ULCCs pioneered. As long as our traditional passenger base is willing to pay for traditional services, that's what they'll get.

Miles (that are valid for international travel) are still a huge factor, ESPECIALLY for business travelers who often have some say in the airline they fly (I always did in the white collar world, company had arrangements with three airlines, I could use any one of those and I stuck to DL for the miles).

My wife tried ULCC a la carte once. She learned her lesson.

Worst case, more rows in our cabins get converted to "basic" fare. Not much else will change.

Funny planes are still running 90% full guess you are off on that point, even during economic downturns.
Spending extra $30-80 on a child (you can easily multiply that by 2 or 3 depending how many you have) that doesn't need carry on or a checked bag doesn't make any financial sense. That's me thought, I don't like to waste money.

Honestly the seats on Frontier are bigger than in coach of DL/UA/AA

This video does a good job of explaining it:

https://www.youtube.com/watch?v=cnfoTAxhpzQ

I agree F9 has nice seats.

I said they pioneered a niche, and it may get bigger. I didn't say US ULCCs are failing, I said they are not putting the big hub and spoke airlines out of business. Again, worst case, legacies convert more cabin seat rows to ULCC style amenities and cost... throw in some miles and it's competitive.

You of course, do you. But you're presumably a professional pilot, so therefore a cheap SOB :D

If you're a legacy pilot, sleep easy, they're not taking over.

If you're a US ULCC pilot, sleep easy, they're not going away.

If you're a foreign ULCC pilot... yeah you might have something to worry about.

I believe that the ULCCs in the US will survive and become an integral part of the industry. I'm pretty confident of that. What I don't know is how large they can become? Spirit and Frontier both have big growth plans and will have a combined 500 airplanes. What percentage of the market share will ULCCs become is the real question here.

If you listen to Frontier & Spirit management, they will tell you that the ULCC market in Europe is very large and it's very small here, so we have tons of room to grow. The difference though is that Europe doesn't have a SouthWest. Europe is more legacies and ULCCs, where Southwest fills the gap between the 2 here in the US.

I believe that the Legacies and ULCCs can healthily coexist in the US. It's different products for different consumers. There is a huge spectrum of consumers in the US, and I think there's room for both types of airlines to do well.

As a ULCC pilot myself, I hope to see the ULCCs do well, but I understand that it's a second tier airline. The latest round of contracts have pretty well settled that. I currently make about 15% less than my counterpart at United.

There are 2 questions that deserve further discussion.
1) How does Frontier/Spirit do during a recession?
2) Can they break into the transatlantic market? (Frontier has 18 A321XLRs on order)

I agree completely

Spirit routinely highlights to their investors that they aren't taking market share from other airlines. They create new market share everywhere they go by making travel possible for people who simply wouldn't fly otherwise.

Some of their international flights are great examples. A person in the US with international family might be able to afford to visit once a year flying AA, but they can visit 4-5 times flying spirit. All they have to do is keep some clothes and stuff with their relatives so they don't need to pay a dime for bags, and have the forethought to bring a snack and (empty) water bottle with them instead of buying airport or airplane food and drinks. That $1000 AA seat costs $200 on Spirit.

Or some of the little airports Spirit flies to just a couple of times per week or just once a day. Those passengers would take a bus or drive at least partway to their destination if Spirit wasn't there. Their business model supports these low frequency pairings so they're pretty much printing money just by showing up with a $60 ticket as an alternative to taking the bus.

Last time I looked, Spirit was saying that they had identified over 600 additional pairings that would be profitable, and due to growth constraints they can only pick up a few dozen each year at most. That's 10 years of additional growth they already have lined up ready to go, at whatever profit margin they use as a cutoff.

Sustainable? When the economy burps or crashes again, where do their passengers go? Their fares are low enough that they think they'll actually be positioned better than anyone else since just about anyone will still be able to fly with their low fares. The primary threat in those situations is the 50% or so of their income coming from non-fare revenue. It remains to be seen if passengers will continue to pay $3 for a bottle of water during a recession, and that could cut into non-fare revenue side. They'd have to make up for that somehow, either cutting service on routes that don't keep buying water and snacks or whatever, or raise fares to make up the difference. In either scenario though, the fact is that they've got a dozen more seats in each plane than anyone else and their whole system is structured for low costs so their adjustments will look minor compared to everyone else who is still saddled with higher CASM.

I swear that wasn't me at 5am stealing your newspaper 🤣🤣🤣.

Agree, plenty of room for everyone here in the states. Personally I don't think frontier name will be around in 5-10 years.

I’ll just add that I jumpseated on spirit for the first time the other day. Seat was fine, didn’t feel cramped, FAs were super nice, offered me free food/drink, plane was clean and early. Everyone I spoke to was friendly and accommodating. Certainly wasn’t the bedlam that is described in some of the stuff I’ve read.

It’s not so much the product is so much different. It is the clientele. Every time I deadhead on a legacy carrier I do not notice much difference in the product from a comfort standpoint but the in seat entertainment is nice. Mostly it’s the people. You don’t have to make an announcement on delta even in coach that you need to wear headphones and cannot just blast sound from your device for the entire plane to hear. Most folks are civil, generally well groomed, and not carrying a 3ft tall plastic cup they plan to take home and put on top of their fridge to collect dust for the next decade. That’s the difference and sometimes that experience is worth the extra money.

It is a byproduct of the frequent flier points systems. Legacies are mostly flown by those who fly frequently and/or are interested in collecting points for future travel. Corporate travel accounts are main drivers for this type of thing. Beat the FF programs and you will beat the legacies.

Seems pretty accurate. Just look at the upgrade list on most Legacy flights. 120 seat aircraft will have 50 people eligible for an "upgrade" to one of the 2 available seats in first. Thats the genius with these reward "levels" at airlines. They basically don't mean anything and carry little to no cost to the airline, but it guarantees brand loyalty.

"I only fly XXX Airline because im "paper level elite and am working on becoming foil level. That will allow me a window seat, if available, on any west bound flight that is north of the 15 degree latitude line"

I would beg to differ somewhat on the clientele. AA MIA to DCA last week the poor FA had to tell a passenger 4 times to use headsets. The level of cleanliness and level of couth are the same these days. particularly in the back

My last flight as a Spirit FO, 2 pax peed in their seats and some lady must have been afraid her baby would be sucked down into the lav toilet so she had the baby poop in the fwd lav sink.

That kind of thing happened on my flights almost every month while I was there.

ULCC’s can grow in the US but will never match the market share of the big 3. The Legacy’s control all of the markets in all of the major US cities and therefore generate a revenue premium that the ULCC’s will never get. ULCC’s will also see their costs increase over time as their employee groups grow larger and negotiate better contracts and as their aircraft age. The problem is they compete on price and will struggle to increase revenue to match their increased costs. This is my opinion only

Bad example. MIA= all bets are off.

Don’t forget about network size. You just can’t get to a lot of places on the U/LCCs.

Definitely true. Right now Frontier serves over 100 destinations and has less than 100 airplanes. Lots of routes are 3 or 4 days a week service while the legacies are usually 3 to 4 times a day.

I’m just a lowly cargo pilot.....but I do spend alot of time in the back of delta, united, and american. When I’m flying my family somewhere....it’s usually on a LCC. I don’t see the product as inferior to any legacy carrier domestically.....from a coach standpoint.

Agreed. My family of five have flown on Spirit, Allegiant and Frontier without issues.

I just did a search for a roundtrip LAS - MCO . depart 11-14 and return 11-18 cheapest nonstop fare.

Frontier is $220
Southwest is $560

So lets say a family of four traveling. You check one big bag on Frontier for $80 roundtrip and then do backpacks for the flight. Saving over $1200. That's a lot of money you can spend on your vacation.

I have a Delta captain friend that buys tickets on Frontier for his family instead of dealing with non rev fun.

So just saying cheap sells. Id be willing to bet most pilots on here go to Costco or Sams club.

Just bought a Disney round trip for 5 people and saved a ton of money flying frontier. Checked 2 bags between us and we are good to go. Would have driven if it wasn’t for the frontier prices.

Have you looked at the difference in customers on a Spirit flight vs a Delta-AA-United flight? It’s very noticeable. Just go walk through the terminals even. There’s a market for it, and they are catering to it. Plenty of work for everybody.

Add to that Central America and certain Caribbean islands (cough D.R.). I was always amazed at the complete mess those cabins were after a flight from those locations. Apparently they just assume the seat is a toilet and the floor is a trash can.

Need more be said?

Europe has a Southwest. It’s called Ryan Air.

Only thing is- WN is a desirable job while FR is a horrible company to work for...

I jump on Spirit quite often and agree that the crews are great and the clientele can best be described as “interesting”. I actually had a passenger offer to share his weed with me during a flight, which I politely declined. I had to gently remind him several times that he needed to refrain as well since he asked me several times throughout the flight if I minded it he “took a hit”. People watching can definitely be an endless source of entertainment.

Haha. That’s awesome.

Best part of working at Spirit is my interaction with any back of the house trash, is minimal. 99% is fine and the 1% that isn’t, well there is a person to call for that. The days of leaving the flight deck to handle an issue went the way of the dodo when the social media presence increased on planes

Ironically the only fecal/bodily fluid issues I’ve had the pleasure of having to call cleaners for was from the “comfort animals.”

At Spirit, I think some of the ‘interesting’ clientele we see has a lot to do with some of the city pairs we do and the fact that we don’t cater to business travelers.

Yeah Ryan air is the demonic-possessed twin of SWA.

I would say horrible is much to kind!

No.
Ryan Air is a ULCC. Southwest is a LCC. They are very different.

The European market is basically comprised of the big national legacy airlines (BA, Air France, Lufthansa) and the ULCCs (Ryan, Easy, Wizz). There really isn't an equivalent of Southwest in Europe, especially anywhere near its scale. Sure, the big national legacy airlines have tried to create their own LCC spinoffs but they are not like Southwest.

My point being, the ability for the ULCCs to achieve the same market share in the US as they have in Europe is hampered by the existence of Southwest here.